Facts about Franchise Businesses

What is a franchise business?
A franchise business is a form of trade practiced by few companies for distributing their products by third parties. The independent operator trades with the business method, goodwill and goods of the company. He/ she has to pay a royalty fee and a percentage of their total income to the company. The company who allows the independent operator to use its trademarked goods is called the franchisors. The independent operator who takes this kind of dealing is called franchisee.

Which are the companies who can opt for this form of trade?
This form of trade is very useful for expansion purpose. Some companies who can opt for this kind of dealing are:

* Companies with a good annual profit record.
* Companies expanded over a larger geographical area.
* Companies with unusual concepts.
* Companies which are less expensive to operate.

What are the advantages of Franchise business?
Such trades are advantageous on the part of the owner as well as the holders.

From the holder's perspective:
* It provides self employment opportunities to the person who has acquired the license for some trade from the owner.
* It provides an opportunity to start this form of dealing without having to go through a lot of hazards of starting a new company altogether.
* It provides the new holder with training from the prime owner. With this expert training he/ she stands with a bright opportunity of expanding their trade.

From the owner's perspective:
* They have the opportunity to expand their business over a larger area.
* They will have to go through lesser legal proceedings. It is a kind of selling out the ownership with some other person.
* They will have the opportunity to get a higher income. The holder will utilize his full expertise to attain the highest income. This in turn will come as an income to the owner.

Therefore, on an overall basis you can call such dealings the safest bet for you. If you are the owner then you can get your business expanded without having to worry a lot. At the end of the year you can expect to get a handsome amount as royalty fee and percentage of the total income of the franchisee business.
If you are the holder then you can enjoy the entire profit of the business by giving out only a part of the total income. The success of both the parties depends on how well they bid on the contract amount. The holder will be successful if he can bid the lowest royalty fee and percentage on the total income. The owner is always the most beneficent. In any case, it is a win-win situation for both the parties.

Source: Franchising Nation, eNewsletter, Team India Managers Ltd

How to Choose the Best Franchise Ideas

Are you interested in starting your own company but are worried about an idea that will sell? If so, consider franchising since you have access to many established and successful franchise ideas to choose from. Without having to worry about something new and original that customers will switch their chosen brands for, you can take advantage of a known brand and business that is already generating profit and open up your own branch of it. It takes a lot of the stress out of marketing a new product and takes advantage of the pre-existing customer base. Unless you want to take a chance with something entirely new, use a franchise directory and start looking for existing franchises for sale and what market you’d like to work in.
You need money to start any new business, and even more so with a franchise since you need to be able to afford to pay for it upfront. The upside is that there is franchise financing which you should take advantage of to free up your saved money to pay for other expenses you will encounter when starting the business. Buying a franchise is also beneficial because you have little legwork to do in terms of marketing yourself or designing extensive advertising campaigns to gain clients. You will have customers right away due to the established brand you will be selling, so if you are weak in the selling department, this is the route for you. However, you will need to support and pay into any marketing strategy or campaign the franchise sets up, and you have little control over how to run your business, sales, design or inventory, since it is all a package deal. A franchise is really the best option only for someone who is looking more to manage their own business than create one, since little creativity is required. Examine your skill set to determine what area of expertise you have to contribute. Don’t choose a franchise in an industry you are interested in but have never worked in unless you are planning to hire a manager to run it for you. Know what you can offer and find a franchise list that supplies available stores in that industry in your area. When you have chosen what you want, create a business plan of your projected costs, profits, plans and changes to bring with you when you apply for franchise finance. This will help you secure your loan and have a plan for the future of your business. When the loan is secure, hire your staff, order your inventory, and put your plan into action.

Source: Franchising Nation, eNewsletter, Team India Managers Ltd

Pros and Cons of Buying a Franchisee today

The advantages offered by investing in a franchise have grown considerably. In this day and age entrepreneurs are looking for the best possible opportunities and fast. They want to jump in to the next bandwagon that's available. So why should you consider a franchise? That's simple.

Advantages of a franchise

• Owning your own business. Because when a person works for himself, the efforts are recompensed fast and at a high level.
• A franchise allows many business objectives.
• A franchise is a part of a business that has already been established and is profitable for the original owner and has a mature customer base, which will reduce the risk of starting a business alone.
• The franchise allows to obtain the key to operate the business, the "know - how", the success in the market.
• A fast and safe development, since it has been demonstrated that people who go with franchises reach the success point quicker, which is needed in order to achieve long-term stability.
• The business has a brand guaranteed by the previous marketing activities, a prestigious brand, accepted and recognized both nationally and internationally.
• The franchisee will benefit from new developments in its network and will be implemented and paid by the franchisor, thus satisfying the demands of the market.
• The franchise is continuously updated.
• The franchisees pay to the parent company to provide the ability to implement important improvements in the system that was subsequently implemented in the main business successfully.
• Buying groups are cheaper. While your firm belongs to a franchise, you get more favorable purchasing conditions, more favorable payment terms and the security to obtain the materials. In addition you will benefit from the updated and comprehensive information regarding the franchisor's knowledge of the market and the sector.
• Plans for initial and ongoing training to give you the opportunity to work at a level regardless of your previous experience and success/failures.
• The franchisee benefits from a brand known nationally and internationally and investing large amounts in advertising both in newspapers, radio and television.
• The franchisee benefits from a brand with financing facilities, training and permanent assistance.

All this plus other benefits are added to the advantage of a franchise, but we also must provide the disadvantages of acquiring a franchise.

Disadvantages of a franchise

• When opening a franchise we must contemplate and cover the high costs of entry, the royalty and advertising.
• Disagreement between franchisor and franchisees can arise in the processes and they can have different opinions about the business methods.
• The low efficiency and other outlets of the network can seriously affect the image and reputation of your establishment.
• The franchisees have no freedom to make the necessary decision to run their businesses, this is the franchisor exclusivity.

In addition

• Sometimes you will receive poor service, support and assistance from the franchisor, because their interest is to attract new franchisees and not to care for what they have already collected on.
• Resource constraints that affect service delivery.
• Signing with an unethical franchisor who wants nothing to do with the building of the franchise’s name, and only wants to earn from selling its brand.

As you can tell it is important to analyze as many factors and aspects before purchasing into a franchise.

Source: http://www.ozcarguide.com/business-money/start-ups/796-pros-cons-buying-franchise